Professional Documents
Culture Documents
Jimmie Browne & John Devlin, Asbjorn Rolstadas & Bjorn Andersen,
CIMRU, SINTEF,
University College Galway, Ireland. Norwegian University of Science and
Technology,Trondheim, Norway.
Abstract
Performance measurement is a prerequisite to performance improvement. For enterprises
measure how they are performing at present, and be able to measure how they are
performing after any changes. Riggs and Felix [1983] claim that “if an improvement can’t
measures are also important for comparing performance between enterprises. ‘Best
practice’ within an industry is determined by the enterprise with the most desirable levels
enterprises were to use a similar set of performance measures. The ENAPS performance
measurement system seeks to achieve this goal by producing a generic set of performance
measures that enterprises can use to measure and compare their manufacturing practices.
1. Introduction
The motivation behind this paper originates from the European Commission funded
ESPRIT project, ENAPS (European Network for Advanced Performance Studies). The
objectives of this project are to establish and test a permanent European network for
generic set of performance measures to be used in this network. The network will allow
1
enterprises to view performance measurement data from other enterprises all over Europe
In recent years, many changes have occurred in the way manufacturing enterprises operate.
Through the use of advanced manufacturing technology, enterprises have moved from
have changed, the way in which they are measured has not. Therefore, there is a need for
new performance measurement systems that take account of these changes in the
manufacturing industry.
This paper reviews traditional performance measurement systems and why they are now
performance measurement systems for World Class Manufacturing (WCM) are discussed
and a brief review of two of these performance measurement systems (TOPP and
AMBITE) is given. Some important issues and guidelines for developing a performance
measurement system are also articulated. Finally, based on these guidelines, a new
performance measures (e.g. percentage reworks per day per direct employee).
2
‘Performance Measurement Data’ are values or results for performance measures
and indicators (e.g. the number of reworks per day = 36 or the percentage reworks
management accounting. These techniques were developed in the late nineteenth and early
twentieth centuries to meet the needs of expanding manufacturing industries. The concepts
were fully formalised in the 1930s and since then have been the basis of manufacturing
performance measurement systems. In recent years, enormous changes have taken place in
technology and production techniques that have made traditional performance measurement
are at best irrelevant and at worst positively harmful. There are five main problems with
1991], namely:
(i) Lack of relevance: Management accounting reports are not directly related to the
manufacturing strategy, are not meaningful for the control of production and distribution
3
(ii) Cost distortion: Traditional cost accounting is concerned with cost elements. The
pattern of cost elements has changed in recent years, and this detailed analysis is less
important. Also, the distinction between direct and indirect costs (and variable and fixed
(iii) Inflexibility: Traditional management accounting reports do not vary from plant to
plant within an organisation and they do not change over time as business needs change.
Therefore, cost accounting reports are usually received too late to be of value and, as a
result, are usually viewed with disdain by operations managers because they do not help
them with their job and can be used to blame the operations manager when variances are
negative.
assessing the pay-back on capital projects can impede the introduction of WCM, and can
cause managers to do wasteful and unnecessary tasks to make the figures look good. Also,
concentrating on machine and labour efficiency rates encourages the production of large
batch quantities and cost accounting requires a lot of detailed data that can be costly to
obtain.
(v) Subjection to the needs of financial accounting: Too often cost accounts are
accounting systems must be based on different methods and assumptions than on the
financial accounts. These methods apply to such issues as inventory valuation, overhead
4
According to Umble & Srikanth [1990] the assumptions that management accounting
techniques are based on are invalid, as they are local in scope. These assumptions are listed
below together with the reasons why they are considered invalid.
(a) “The total cost of the system equals the sum of the cost of each operation.” This
(b) The total cost of each operation is proportional to the direct labour for that operation.
(c) “The total cost for the system, excluding material cost, is proportional to the sum of the
direct labour costs.” Direct labour costs make up only a small proportion of the total cost
(d) “The standard cost procedure, which utilises the calculated overhead/labour ratio, can
be reversed to estimate the impact of any action on the total cost of the system.” If the
calculated overhead/labour ratio is invalid, then the converse must also be invalid.
(e) “In manufacturing operations, the effect of optimising local decisions, as measured by
their impact on the cost of the operation, is to optimise the total system.” Optimising some
(f) “The key to reaching the global optimum is achieving local optima.” Some local
systems based on these techniques are considered to be invalid for manufacturing industries
today.
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3. Modern Performance Measurement Systems
Apart from the problems with traditional performance measurement systems, there are
other reasons why there is a need for new performance measurement systems in
quality, performance and flexibility and management techniques used in production plants
they need new methods of performance measurement to control their production plants.
Traditional performance measurement systems are invalid for the measurement of world
class manufacturing practices as they do not supply the business with the required
they are primarily concerned with cost. But in today’s manufacturing environment, cost
based measures are no longer the only basis for decision making in enterprises. Enterprises
now require performance measures that are based along other competitive dimensions, such
as time and quality to aid in decision making. The new performance measurement systems
required by world class manufacturing enterprises should have the following characteristics
[Maskell, 1991]:
1
Performance measurement systems need be similar at different locations for comparison purposes.
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• They provide fast feedback to operators and managers.
performance.
Modern performance measures are not newly developed, what is new is the importance
placed on them. They have been around for some time, but only recently have world class
manufacturers begun to replace their cost based performance measurement systems with
ones that truly drive the production process. Since performance measures can also dictate
behaviour, it is very important that they are suitable for the processes they are measuring.
When adopting these modern performance measurement systems, the existing systems must
be abandoned. If new measures are introduced in addition to existing ones, then they will
not have their intended usefulness and impact. They will either be ignored, because people
are more familiar with the old measures, or both sets of measures will be used and the
enterprise will not gain the coherence and focus that the new measures are intended to
offer. The introduction of new performance measurement systems should go hand in hand
with the introduction of new manufacturing techniques. For example, before business
processes can be re-engineered there must a clear strategy (manufacturing strategy) for the
enterprise and suitable performance measures must be in place to measure the impact of the
measurement systems (the TOPP system and the AMBITE system) will now follow.
One example of a new performance measurement system is the TOPP system which was
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Technology (NTH), the Norwegian Federation of Engineering Industries (TBL) and 56
enterprise is performing in all the areas of manufacturing. It is divided into three parts.
The first part is used to obtain an overview of the enterprise and is answered by one person.
The second part is used to understand how the enterprise operates and might be answered
by twenty different individuals. Finally, the third part is concerned with focusing on
twenty specific areas within the enterprise that may need improvement, such as marketing,
The TOPP system views performance measurement along three dimensions. These are (i)
Effectiveness - satisfaction of customer needs, (ii) Efficiency - economic and optimal use of
enterprise resources and (iii) Ability to Change - strategic awareness to handle changes.
Answers to each question are qualitative (i.e. on scale from 1 to 7, where 1 is poor and 7 is
excellent). Enterprises are requested to answer each question for their status today, and for
their expected status in two years from now. They are also requested to rate how important
The TOPP system is very large and very time consuming to fill out. It is over sixty pages
long and there is about fifteen to twenty questions on each page. Each question also
requires three ratings (status today, future status and relative importance). Therefore, in
total about 3,000 assessments need to be made to fill out one complete questionnaire. The
TOPP system is a generic questionnaire and, therefore, the performance measures in the
TOPP questionnaire are not directly related to the strategy or customer requirements of
8
enterprises. Also, the hierarchical relationships between the performance measures are not
identified. The TOPP questionnaire is qualitative, based on the views of individuals not on
actual measurements and, therefore, answers can be biased. The TOPP questionnaire is
very thorough and makes enterprises think about areas of manufacturing they may not have
though important before. Anything that the enterprise measures, it will want to improve,
especially performance areas that are marked with ‘G’ (i.e. great importance). Requesting
enterprises to assess their current status and their future status is a strong point of the TOPP
questionnaire. If enterprises wish to estimate their likely future status to be better than their
current status in a particular area, then they must realise that they must introduce an
improvement project for that area. Since all enterprises use the same questionnaire, TOPP
technique that senior management can use to assess the impact of the strategic decisions
made by their enterprise. The framework provides a means of translating the business plan
of the enterprise (i.e. critical success factors) into a set of performance measures. The
performance measures will be directly related to the strategy of the enterprise and will also
be process oriented. The AMBITE framework uses the business model, shown in figure 1,
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Marketing
Product and
Process
Design
Design
Co-engineering Co-ordination
Vendor Customer
Supply Order Fulfilment
Production
Planning &
Control
= Macro Business Process
Each of the five macro business processes (customer order fulfilment, vendor supply,
design co-ordination, co-engineering and manufacturing) in figure 1 are mapped onto five
macro measures of performance (time, cost, quality, flexibility, and the environment). This
is done for the Make To Stock (MTS), Assemble To Order (ATO), Make To Order (MTO)
McMahon and Browne [1993]. This mapping produces the AMBITE performance
Customer Order
Fulfilment
Vendor Supply
Manufacturing
Design
Co-ordination
ETO
MTO
Co-engineering ATO
MTS
Time Cost Quality Flexibility Environment
10
Mapping the five macro business processes to the five macro measures of performance,
manufacturing typology. The AMBITE method takes a critical success factor (CSF) of an
enterprise and maps it on to the AMBITE framework. This produces the strategic
performance indicators relevant to the enterprise. These performance indicators can then
be broken down into many lower level performance indicators. The precise break down of
each performance indicator will be different for every enterprise, thus producing a unique
knows its critical success factors (based on its business strategy) it should not be too
difficult to develop a consistent set of performance indicators for that enterprise that are
directly related to the CSFs. The AMBITE framework produces low level specific
The hierarchical relationships between the performance indicators are defined by this
to almost any enterprise of any size. The framework produces a customised set of
performance indicators for each enterprise that uses the framework. This makes it difficult
indicators. The high level performance indicators for many enterprises will appear very
similar, but they will be made up of very different lower level performance indicators .
Therefore, comparisons at the highest level (i.e. 25 SPIs) are valid, but caution should be
Apart from the two performance measurement systems (TOPP and AMBITE) described
above, there are other performance measurement systems available for use by
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manufacturing industries today. Some of these other performance measurement systems
are: the EFQM model [EFQM, 1996], the ECOGRAI system [Doumeingts et Al., 1994],
the Balanced Scorecard approach [Kaplan & Norton, 1992] and the PMQ [Dixon et al.,
1990].
As well as the guidelines laid out by Maskell [1991] previously, many other authors have
states that the fact that the enterprise is committing time and resources to the development
exercise. This ensures that: “cherry picking” is avoided; business processes which are
important are properly measured; the linkages and conflicts are made visible and managed,
not hidden under the table and the performance measures are relatively stable allowing a
Dixon et al. [1990] argue that irrespective of the competitive priorities enterprises pursue,
successful measurement systems will share five characteristics. These are: (i) mutually
supportive and consistent with the business operating goals, objectives, critical success
factors and programs, (ii) convey information through as few and as simple a set of
measures as possible, (iii) focus on measures that customers can see, (iv) allows all
members of the organisation to understand how their decisions and activities affect the
entire business and (v) support organisational learning and continuous improvement.
Bradley [1996] claims that while modern performance measurement systems should have
the characteristics defined by Dixon et al., some other aspects need to be present in a new
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performance measurement system. He argues that a performance measurement system
should also meet the following four requirements: (i) a framework, that allows a top down
decomposition to successive levels of greater detail, that allows the strategy and/or
customer requirements to be translated into a set of critical performance measures and that
identifies all the business processes; (ii) a business process focus; (iii) performance
measures, that are process oriented, that are quantitative in nature, that are related to a set
of high level macro measures and that are related to either the strategy of the enterprise or
its customers requirements and (iv) an enterprise strategy and/or customer requirement
perspective. Roth et al. [1990] state that performance measures should provide feedback on
the gaps between ‘best-in-class’ and the manufacturing unit’s own performance over time
and that they should accelerate organisational learning and continuous improvement.
Another method of filtering a large set of performance measures is by using the ‘Analytic
performance measures are performance measures that are strongly related to one or more
Table’ and a set of ‘Quality Function Deployment’ symbols to identify the relationships.
All of these authors provide very useful guidelines for developing performance
measurement systems, but most of them seem to have neglected one issue which is also
and more, so called extended enterprises are forming and dissolving, partnerships and
and indicators, that could be applied to many different enterprises, would be advantageous.
This standard set of performance measures and indicators would also be useful for
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Benchmarking’. Of course, having a standard set of performance measures and indicators
is contradictory to having performance measures and indicators that are customised to the
measures and indicators should be suitable for both comparison purposes and to support the
strategy or customer requirements, while lower level performance measures and indicators
would not be suitable for comparison purposes, but would still support the strategy or
customer requirements.
certain ways. For example, some financial people prefer performance measurement data in
terms of monetary units (i.e. costs), such as ‘the amount of overhead cost’, while other
financial people would prefer performance measurement data in terms of ratios and
people may prefer performance measurement data in terms of people (i.e. per employee),
such as ‘overhead cost per direct employee’. Many different people might have many
different views on what to measure and how to express these measures, but it is obvious
that we cannot measure everything in every possible way. What these people are looking
for are customised performance indicators which are local in scope and may be in conflict
with each other. A performance measurement system should measure only a core set of
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and indicators may have a direct effect on others. For example, decreasing the time for a
particular process could be achieved by spending a lot of money and, therefore, increasing
the cost of the process. Very often trade-offs need to be made to maintain performance
enterprise. Therefore, when a change is made, all performance measures and indicators
should be measured to assess the impact of this change. The change may have improved
There is certain information that needs to be stored about performance measures which
should make them more useful. These items of information are detailed in table 1.
calculated.
Description A detailed description of what exactly the Distribution lead time = average
measure, so that it is not left up to the interpretation from arrival of the order at
of the person performing the measurement. outgoing stock until delivery to the
customer.
Unit The dimension along which the performance Days, months, IR£s, ECUs, percent,
Equation Formula to calculate the performance indicator. DLT = packaging time + storage
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time + transport time.
Target A desired performance level, a goal to aspire to. The DLT target is 5 days.
Position At what level in the hierarchy of the performance DLT is a process level performance
measurement system does the performance measure indicator belonging to the ‘Order
Where In which area of the enterprise is the information DLT can be obtained from the
measure or indicator?
Responsibility The position of the person who should perform the DLT is to be measured by the
There is also certain information that should be stored with the performance measurement
data (the results of performance measures or indicators). This information is listed in table
2.
Reason/Notes If any unusual events occurred that would affect the A truck broke down, which added a
result of the performance measure or indicator, they day to the average DLT
Time Stamp The period of time that the performance measure or The average DLT is for one year
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All of the above information would make up a complete result for a performance measure
this information, about performance measures, indicators and their results, is the ENAPS
paper a new performance measurement system has been developed. This new performance
Studies) performance measurement system. Currently involved in the ENAPS project are
five research partners (SINTEF, CIMRU, BIBA, GRAI and TUE) and five industrial
partners (TBL, AMT, Volkswagen, and AUGRAI and ITC) in Norway, Ireland, Germany,
France and The Netherlands respectively. ENAPS is currently under development, but a lot
of work has already been carried out in the area of performance measurement. The ENAPS
business model is shown in figure 3 and reflects a future view of a manufacturing enterprise
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Obtaining Customer
Product Development Marketing
Commitment
Design
Production
Planning & Discard
Control
1 2 3
Service
Provider
From this business model, ENAPS has suggested three levels of hierarchy for defining
performance indicators. These are: ‘Enterprise Level’, ‘Process Level’ and ‘Function
Level’. The performance measures used in calculating these performance indicators are
measured from all over the enterprise under the following eight headings: ‘Accounts’ (13
measures), ‘Product Development’ (20 measures), ‘Marketing and Sales’ (22 measures),
Currently, there are 117 performance measures (shown in Appendix A) used in calculating
the performance indicators in the ENAPS performance measurement system. All of the
enterprise. Nearly all of the ‘Process Level’ performance indicators should be suitable for
nearly all manufacturing enterprises. Finally, most of the ‘Function Level’ performance
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The ‘Enterprise Level’ performance indicators are very general indicators. They give an
overview of the size and financial position of an enterprise. ENAPS has defined 16
The ‘Process Level’ performance indicators are used to determine the performance of the
processes that are defined in the ENAPS framework. The ENAPS performance
measurement system has identified two types of processes. These two processes are
‘Business Processes’ are the value adding processes involved in the creation and
production of a product and its sale and transfer to a buyer. ENAPS has identified four
(i) Customer Service: All activities involved in providing after-sales service, including
product take-back.
(ii) Obtaining Customer Commitment: All activities involved from market analysis to
sales.
(iii) Order Fulfilment: From receipt of an order until the customer has received and paid
‘Secondary Processes’ are the non-value adding processes of an enterprise. ENAPS has
identified two groups of secondary processes and these are described below.
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(i) Support Processes: are processes that support the business and evolution processes
and each other, while providing the resources and infrastructure necessary to perform these
(ii) Evolution Processes: provide means for the enterprise to achieve its long-term
strategic objectives through managing and planning the evolution of the enterprise and its
Each of the six processes has a certain number of performance indicators assigned to them
Commitment (13 indicators), Order Fulfilment (26 indicators), Product Development (16
Together with the 16 ‘Enterprise Level’ indicators, there are currently 95 performance
These ‘Process Level’ performance indicators where developed from ‘Function Level’
performance indicators that are used to determine the performance of the functions (or sub-
processes) that ENAPS has defined. Each of the six processes has a set of functions
associated with them. The ENAPS functions, and the processes they belong to, are listed in
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BUSINESS PROCESSES SECONDARY PROCESSES
PRODUCT DEVELOPMENT
•Co-engineering
•Process Engineering and design * It is possible for a function to belong
•Product Engineering and design in more than one process.
•Product Research *
measurement system, as the generic ‘Function Level’ indicators were grouped under their
process headings and the other ‘Function Level’ indicators were deemed to be too specific
for comparison purposes. The generic performance measures and indicators for each
process and function were developed with the following six dimensions of measurement in
mind: time, cost, quality, volume, flexibility and environment, but not all of these
dimensions are relevant for every process or function. It was also decided that all of the
performance measures and indicators would be quantitative (based on objective real data,
not subjective ratings) and that the performance indicators would be calculated using only
the performance measures defined. The performance indicators need to be quantitative for
within the same manufacturing environment and the same industrial sector. Enterprises can
also compare performance indicators by the size of their enterprise (e.g. turnover or number
countries).
21
The ENAPS performance measurement system attempts to combine the best ideas from
and indicators (like the TOPP system) and uses a process oriented, top-down approach to
developing the performance measures and indicators based on a sound business model (like
the AMBITE approach). There are a large number of performance measures and indicators
in the ENAPS approach, but this is necessary to make it relevant to most enterprises.
Enterprises are not expected to use all the performance measures and indicators , but are
The remainder of this paper reviews the ENAPS system against the ‘guidelines for
The ENAPS measures and indicators meet the guidelines laid out by Russell [1992] in the
previous section, because ‘cherry picking’ of performance measures is not encouraged and
important business processes are measured in the ENAPS system. The ENAPS measures
and indicators do not directly state the relationships between them, but all of the
performance measures are used in the formulae to calculate the performance indicators.
Therefore, each performance measure has at least one performance indicator relating to it
and management is discouraged from creating their own measures or indicators to avoid
sub-optimisation. The ENAPS measures and indicators are stable over time, but should be
reviewed every six months. As Dixon et al. [1990] recommend, the ENAPS indicators
convey information through as few and as simple a set of measures as possible. The
ENAPS measures and indicators do not directly support the critical success factors of
ENAPS system provides a complete set of measures and indicators, so that members of the
enterprise can understand how their decisions and activities affect the entire business.
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The ENAPS performance measurement system is based on a sound framework allowing for
top down decomposition of measures and indicators, which follows the recommendations
of Bradley [1996]. The ENAPS approach is process oriented and the measures and
indicators are quantitative and related to high level macro measures of performance of time,
cost, quality, etc. The ENAPS measures and indicators are not related to specific enterprise
strategies or customer requirements for comparison purposes. Consistent with Roth et al.
using a standard set of indicators, feedback on the gaps between ‘best-in-class’ and the
manufacturing unit’s own performance over time can be determined. Using the Analytic
Hierarchy Process [Kelly ,1995], an enterprise could check the suitability of the ENAPS
6. Conclusions
In this paper we have argued that traditional performance measurement systems, based on
management accounting techniques, fail to meet the needs of world class manufacturing
enterprises. There are five main problems with management accounting techniques that
render them invalid for use in a performance measurement system. These are: lack of
Manufacturing and subjection to the needs of financial accounting. As a result of this, there
is a need for new performance measurement systems that can provide enterprises with the
These new performance measurement systems should have the following characteristics:
they are directly related to the manufacturing strategy, they primarily use non-financial
measures, they change over time as needs change, they provide fast feedback to operators
23
and managers and they are intended to foster improvement rather than simply monitor
lengthy questionnaire, that measures the performance of twenty areas of the enterprise. The
performance indicators that are directly related to the strategy or customer requirements of
an enterprise. Therefore, this approach is not the most suitable for comparison purposes.
Many authors have provided useful guidelines for developing performance measurement
systems which should be taken into account. Different people want different information
from performance measures and indicators to serve their own local goals. This practice
Based on other performance measurement systems and the guidelines laid out in this paper,
a new performance measurement system has been developed: the ENAPS performance
measurement system. The ENAPS approach has a generic set of performance measures
and indicators that were developed using a top-down approach from enterprise level to
process level to function level. The ENAPS performance measurement system performs
well when assessed against the guidelines previously laid out by a number of authors. The
main motivation behind the ENAPS project was to develop performance indicators suitable
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References
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Enterprises”, PhD Thesis, University College Galway.
Dixon, J. R., Nanni, A. J. & Vollmann, T. E., 1990, “The New Performance Challenge”, Business One
Irwin, Illinois.
Doumeingts, G., Clave, F. & Ducq, Y., 1994, “ECOGRAI - A Method to design and to implement
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Lean/AGILE Manufacturing for the Automotive Industries , Aachen, Germany, November, 1994.
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McMahon, C. & Browne, J., 1993, “CAD/CAM - From Principles to Practice”, Addison-Wesley, London,
Great Britain.
Riggs, J. L. & Felix, G. H., 1983, “Productivity By Objectives”, Prentice-Hall Inc., New Jersey.
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comprising world-class manufacturing”, National Center for Manufacturing Sciences and Business One
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Russell, R., 1992, “The Role of Performance Measurement in Manufacturing Excellence”, Proceedings of the
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Bibliography
Bradley, P. & Jordan, P., 1996, “ENAPS Business Model”, ENAPS WP3.2 Final Deliverable, CIMRU,
University College Galway.
Devlin, J, 1997, “Benchmarking: An Intranet Solution”, M.Eng.Sc Thesis, University College Galway.
Browne J. & Jackson S., 1995, “AMBITE: Advanced Manufacturing Business Implementation Tool for
Europe”, AMBITE 12 Monthly Report, CIMRU, University College Galway.
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University College Galway.
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Appendix A: A List of the ENAPS Performance Measures
Accounts:
1 Sales (Turnover) ECU The total amount of money received from customers during the last
period.
2 Fixed assets ECU The present value of investment goods buildings; book value (or balance-
sheet value) machines, cars, etc.; purchasing value.
3 Current assets ECU The present value of inventories (material value, added value NOT
included), cash and other current assets.
4 Purchased material cost ECU The total amount of money paid to suppliers during the last period.
5 Other costs ECU Labour/personnel costs, rent, interest, etc. paid during the last period.
6 Equity ECU Shareholders Capital (Total Assets - External Capital).
7 Receivables ECU The present value of bills to be paid by customers.
8 Current liabilities ECU The present value of bills to be paid to suppliers.
9 Opening stock ECU Value of stock at the beginning of last period in terms of material costs
only.
10 Closing stock ECU Value of stock at the end of last period in terms of material costs only.
11 External capital ECU Loans, mortgages, etc. Long term and short term.
12 Total liabilities ECU Current Liabilities + External Capital.
13 Profit from joint ventures ECU The profit made during the last period which can be attributed to joint
ventures with other enterprises.
Product Development:
1 Number of active products Number Total number of active products where an active product is one which is
listed in the product sales catalogue or any product which can currently be
delivered to a customer. This should not include product variants.
2 Average new product Months The average time from product concept specification document until
development lead time production ramp up, where "ramp up" means to reach full expected
volume production, for new products launched during the last period.
3 Average planned product Months The average planned product development lead time (as defined above)
development lead time for all new products launched last year.
4 Product engineering and design ECU The cost of product engineering and design. Includes labour and
cost equipment but not overheads.
5 Product-related process ECU The cost of developing a production process aimed specifically at
engineering and design cost producing a product. Includes labour and equipment costs but not
overheads.
6 Product research cost ECU The cost associated with product research including labour and
equipment. This includes both basic and applied research cost.
7 Number of new products Number Total number of new products that were launched during the last period
where a new product is one which involves a major development effort
and includes new technology or a new combination of technologies…
… A product is considered "new" if it has been developed within the last
three years and if it is published in the product catalogue as a new product
and not simply a variant of an existing product.
8 Number of new product variants Number Total number of product variants or modified product models that were
launched during the last period.
9 Number of unsuccessful new Number The number of launched new products which had to be withdrawn earlier
products than planned. (Number of premature product deaths) that occurred during
the last period.
10 Total number of customer Number The number of design changes for new products in the last period which
complaint-related design changes were directly related to one or several customer complaints.
11 Engineering drawings change cost ECU The total cost of labour for all engineering drawing changes made during
the last period.
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12 Warranty costs for new products ECU Total cost of recalling and repairing new products covered by warranty
during the last period. This includes labour, materials, transportation and
administrative costs.
13 Number of products launched late Number The number of products which failed to meet the initial scheduled launch
in the last three years date.
14 Number of patents granted in the Number The number of patents granted for technology or products developed by
last period your enterprise in the last period.
15 Number of patents held Number The total number of patents being held by your enterprise at present.
16 Number of co-engineered Number The number of active products which were partially designed by
products suppliers. This does not include consultants.
17 Number of components recycled Number The total number of product components that were recycled in the last
period where recycled means re-used in new or second-hand products or
recycled for reclamation of base materials.
18 Total number of components Number The total number of components produced in the last period across all
produced products. This will be used to calculate the ratio of recycled components
to components produced.
19 Number of part types with Number Total number of part types which appear in more than one bill of
multiple usage materials.
20 Total number of part types Number The sum of all the part numbers minus the number of products. That is all
part types that have potential for multiple usage.
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cancelled order is one which appeared in your enterprises order
processing system but subsequently had to be deleted before delivery due
to customer request.
19 Products sold Number Total number of product units sold in the last period where sold implies
that payment has been received.
20 Number of customer suggestions Number Total number of customer suggestions for product or process
improvement.
21 Number of implemented customer Number Total number of implemented customer suggestions for product or process
suggestions improvement.
22 Sales of new products ECU The total value of sales during the last period from new products, i.e.
products which have been introduced in the last three years and include
new technology or new combination of technologies.
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becomes available this measure may be used).
19 Mass of product produced Kilograms The total mass of material in the products and packaging produced by
your enterprise.
20 Cost of energy ECU The total cost of energy used by production in the last period. This
includes the cost of gas, electricity or oil.
Customer Service:
1 Number of products received Number The total number of product units received back during the last period by
back due to faults your enterprise due to faults in the product. These products may be
recalled by your enterprise or returned by a customer.
2 Number of product units taken Number The total number of complete product units taken back during the last
back for recycling or re- period by your enterprise for recycling.
manufacture
3 Cost of product takeback ECU Total cost of product takeback during the last period where products are
taken back for recycling or re-manufacturing. The costs include labour
(including disassembly), equipment and transportation.
4 Product takeback revenue ECU Total revenue generated from product takeback during the last period.
5 Income from after-sales service ECU The total income generated by after-sales services in the last period.
After-sales service is defined as service activities following receipt of
payment for the initial sale.
6 Average complaint response time Days The average time taken from when a customer complaint is received to
when the complaint is acknowledged by your enterprise. To respond
within the same day means a value of 1, to respond the next day means a
value of 2 etc. The maximum performance is 1.
7 Average complaint resolution Days The average time taken from when a customer makes a complaint to when
time the problem that the customer is complaining about is fully resolved and
the customer is satisfied.
8 Number of customer complaints Number Total number of customer complaints during the last period.
Purchasing
1 Number of active suppliers Number The total number of suppliers which are currently supplying your
enterprise or having supplied your enterprise within the last three years.
2 Certified suppliers Number Total number of active suppliers with quality system certification.
Acceptable are: ISO-9000, BS 5750.
3 Number of purchase orders Number The total number of purchase orders issued during the last period where
each purchase order may include several line items but still represents one
single purchase order.
4 Number of incoming deliveries Number The total number of deliveries to your enterprise by suppliers in the last
period.
5 Number of complete incoming Number The number of deliveries that have the exact amount of material as
deliveries requested on the Purchase Order.
6 Number of incoming deliveries Number The number of deliveries that are received on or before the day specified
received on time on the Purchase Order.
7 Number of incoming deliveries Number The total number of deliveries from suppliers which contained defective
containing defective parts material or parts.
8 Average material procurement Days This starts from the determination of material requirements until the
lead time material is on the shop floor in the location required to be ready for
production. Includes material planning and procurement + transportation
+ receipt check and store + picking.
9 Purchase value of parts rejected at ECU The sum of the value of all parts (material or components) rejected at
incoming inspection incoming inspection.
10 Number of suppliers visited Number The number of suppliers to whom employees of your enterprise visited
during last period.
11 Number of on-time payments to Number The total number of payments to suppliers which were received by the
suppliers supplier on or before the promised date.
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Personnel
1 Average number of employees Number Average number of full-time equivalent employees, regardless of the
contract over the last period.
2 Total wages ECU The total cost of wages, salaries and benefits (pensions, insurance etc.) for
all employees in the last period.
3 Number of person-days lost due Number The total number of person-days lost during the last period due to
to absenteeism absenteeism.
4 Maximum person-days available Number The maximum possible number of person-days available during the last
period (excluding overtime). Total average number of employees
multiplied by the number of person-days per employee.
5 Number of departed employees Number The total number of employees who left the enterprise for any reason
other than retirement during the last period.
6 Number of new employees Number The total number of new employees who joined the enterprise during the
last period.
7 Overtime cost ECU The total labour cost of overtime for the enterprise during the last period.
8 Average number of employees Number The average number of employees directly involved in product
involved in product research and development projects within your enterprise during the last period.
development
9 Average number employees Number The average number of employees directly involved in marketing and
involved in marketing obtaining customer commitment within your enterprise over the last
period.
10 Average number of employees Number The average number of employees who at some time during last period
involved in project teams were involved in an improvement project.
11 Training and educational cost ECU The total number of ECU's spent on training during the last period.
Includes internal and external training and education.
12 Average total working days for an Days The average total working days for an employee during the last period.
employee
13 Average time spent on training for Days The average number of days during the period for which an employee
each employee undergoes training.
14 Cost of incentive schemes ECU The total cost of all incentive schemes during the last period.
15 Person-hours spent at Hours The total number of person-hours spent at management team meetings
management team meetings during the last period.
16 Management team person-hours Hours The total number of person-hours spent on the development of enterprise
spent on strategy strategy during the last period.
Others
1 System downtime Hours The total percentage of time for which the main computer system in the
enterprise (network server or management information system server etc.)
was unavailable in the last period.
2 Number of injuries Number The total number of work-related injuries in the last period.
3 Cost of preventative maintenance ECU The total cost of preventative maintenance of machines, computers, etc. in
the last period.
4 Number of employee suggestions Number The total number of written employee suggestions received during last
period. These suggestions may relate to process improvements, product
improvements or any other improvements within the enterprise and may
come from any personnel.
5 Machine downtime Hours The sum of all hours of downtime on critical machines during the last
period where a critical machine is one which is essential to maintain full
production.
6 Maximum available machine Hours The sum of the maximum possible available production machine hours
hours during the last period. This should be calculated as the total number of
hours during which the entire production facility is "open".
7 Cost of improvement projects ECU The total cost of investment in improvement projects and associated
activities during the last period. This includes labour, services
(consultancy, training etc.), equipment and software for projects aimed at
improving the performance of any process.
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Appendix B: A List of the ENAPS Performance Indicators
Enterprise Level
1 Return on capital employed % Capital Turnover*Margin
2 Return on equity % Profit/Equity
3 Capital turnover % Sales/Total assets
4 Margin % Profit/Sales
5 Profit ECU Sales - Operating expense
6 Operating expense ECU Purchased materials cost + Other costs
7 Quick ratio % (Current assets + Receivables)/Current liabilities
8 Cash ratio % Current assets/Current liabilities
9 Payment capacity ECU Current assets - Current liabilities
10 Sales outstanding % (Receivables * 360)/Sales
11 Sales per employee % Sales/Number of employees
12 Value-added per employee % (Sales-Purchased material cost)/Number of employees
13 Inventory turnover Days Average value of stock*360/Purchased material cost
14 Debt ratio % External Capital/Total liabilities
15 Customer satisfaction Ratio Number of customer complaints/Total number of orders
16 Value of joint ventures % Profit made from joint ventures/Sales
Product Development
1 Average product development lead Weeks The average time from product concept specification document until
time production ramp up, where "ramp up" means to reach full expected
volume production, for new products launched during the last period.
2 Product launch target adherence % Number of products launched late in the last three years/Total number of
new products launched in the last three years
3 Product development efficiency Ratio Average planned product development lead time/Average product
development lead time
4 Product development cost % (Total product engineering and design cost + total product research cost +
total product-related process engineering cost)/Sales
5 Engineering change costs % Cost of engineering drawing changes/Sales
6 Warranty costs of new products % Warranty costs of new products/Sales of new products
7 Product development reliability % Total number of customer complaint-related design changes/Total
number of active products
8 Contribution of new products % Sales of New Products/Sales
9 New product introduction % Number of unsuccessful new products/Total number of new products
performance
10 Proportion of new products % Number of new products developed last period/Total number of active
products
11 Extent of co-engineering % Number of co-engineered products/Total number of new products
developed
12 Patenting performance % Number of patents awarded last period/Total number of patents held
13 Modularity of products % Number of components with multiple usage/Total number of components
14 Proportion of people in product % Number of people involved in product development/Total workforce
development
15 Product variance % Number of product variants/Number of active products
16 Components recycled % Number of produced components recycled last period/Total number of
components produced last period
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Obtaining Customer
Commitment
1 Tender preparation lead time Weeks as is
2 New customer return % Sales to new customers/Sales
3 Tender return % Total cost of preparing tenders/Total sales resulting from tenders
4 Marketing cost ratio % The marketing cost/Sales
5 Customer base growth % Number of new customers/total number of customers
6 Lost customers Ratio Number of lost customers/Total customers
7 Market share for main product % as is
8 Tender efficiency % Total tenders value/Sales
9 Tendering hit ratio % Number of successful tenders/Total number of tenders
10 Customer visits % Number of customer visits/Number of customers
11 Value added per marketing % (Sales - Purchased material)/Number of marketing employees
employee
12 Customer dependency % The percentage of customers accounting for 80% of sales volume last
period.
13 Green product sales ratio % Sales of products receiving country's green label/sales
Customer Service:
1 Average complaint response time Days as is
2 Product takeback profit % Product takeback revenue - Product takeback cost/Sales
3 After-sales service profit % Income from after-sales service/Sales
4 Average complaint resolution time Days as is
5 Returned products ratio % Number of products returned because of faults/Total number of product
units sold
6 Product takeback ratio % Number of Product units taken back/Number of product units sold
Order Fulfilment:
1 Commercial lead time ratio % Commercial lead lime/Order fulfilment lead time
2 Material procurement lead time ratio % Average material procurement lead time/Order fulfilment lead time
3 Production and assembly lead time % Production and assembly lead time/Order fulfilment lead time
ratio
4 Distribution lead time ratio % Distribution lead time/Order fulfilment lead time
5 Commercial cost ratio % Commercial costs/Sales
6 Inventory cost ratio % Inventory costs/Sales
7 Distribution cost ratio % Distribution cost/Sales
8 Materials cost ratio % Purchased material costs/Sales
9 Production cost ratio % Production cost/Sales
10 Average order value ECU Sales/ Total number of customer orders
11 Work in progress % Cost of work in progress/(Purchased material cost + Total Production
cost)
12 Value of cancelled orders % Value of cancelled orders/Sales
13 Outgoing delivery quality % Number of customer deliveries containing defective parts/Total number
of customer orders
14 Outgoing delivery completeness % Number of complete customer orders/Total number of customer orders
delivered
15 Outgoing delivery timeliness % Number of customer orders delivered on time/Total number of customer
orders
16 Incoming delivery quality % Number of incoming deliveries containing defective parts/ total number
of incoming deliveries
17 Incoming delivery completeness % Number of complete incoming deliveries/Total number of incoming
deliveries
18 Incoming delivery timeliness % Number of incoming deliveries received on time/Total number of
incoming deliveries
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19 Supplier payment timelines % Number of on-time payments to suppliers/Total number of purchase
orders
20 Customer payment timeliness % Number of on-time customer payments/Total number of invoices
21 Incoming rejection cost % Components rejected at incoming inspection/Purchased material costs
22 Percentage re-work % Re-work hours/Total production hours
23 Percentage scrap % Cost of scrap material/Purchased material cost
24 Energy cost % Cost of energy/Sales
25 Production process environmental- % Mass of environmentally-unfriendly material produced/total mass of
friendliness product produced
26 CO2 volume M3/ECU Number of cubic metres of oil * CO2 ratio/Sales
Support Processes
1 Overtime cost % Cost of overtime/ Total wages
2 Preventative maintenance cost % Cost of preventative maintenance/Sales
3 System downtime % Number of hours the main computer system was unavailable/Total
available hours
4 Employee absenteeism % Number of man days lost due to absenteeism/Maximum man days
available
5 Employee turnover % Number of employees that left the enterprise/Average number of
employees
6 Machine downtime % Sum of all machine hours of downtime/Maximum number of machine
hours
7 Training investment % Training and educational cost/Sales
8 Time spent on training % Average time spent on training for each employee/Average total working
time
9 Employee participation % Number of employee suggestions/Average number of employees
10 Health and safety % Number of injuries/Average number of employees
Evolution
1 Improvement effort % Cost of all improvement projects/Sales
2 Incentive scheme investment % Cost of incentive schemes/Sales
3 Employee improvement efforts % Number employees involved in an improvement project team/Average
number of employees
4 Total person-hours spent at Hours as is
management team meetings
5 Total management team person- Hours as is
hours spent on strategy
6 Customer participation in % Number of implemented customer suggestions/Number of customer
developments suggestions
7 Certified suppliers % Number of ISO9000-certified suppliers/Number of suppliers
8 Suppliers contact % Number of suppliers visited/Number of suppliers
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